Year II Number 253 MOP 6.00 Wednesday April 3, 2013 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: Vitor Quintã www.macaubusinessdaily.com
Bumps in road for car sales W
ith uncertainty over changes to Macau’s road network and possible hikes in taxes, car sales might be flat this year, says the Macau Motor Traders Association. “There are possibly new measures from the government to raise the costs of keeping a car – like hikes on parking fees and taxes,” explained Patrick Tse Ka Ming, the group’s president.The Transport Bureau said on December 28 that it would launch a public consultation in the first quarter of 2013 on possible measures to ease road traffic congestion, including heavier annual taxes on vehicles and increases in public parking charges. More on page 4
March casino revenue up 25 percent March casino revenue rose 25 percent to a new monthly record of 31.34 billion patacas (US$3.91 billion). It beat the previous monthly record set in December last year. Five Friday to Sunday periods in March might have helped the numbers. The current importance of the mass market was illustrated last week. Galaxy Entertainment Group Ltd said during the firm’s 2012 earnings press conference that of 50 ‘new’ tables recently granted to it by the government, twothirds would be going to the mass market.
Temporary licensing for property sales staff
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he government is ‘confident’ it can be monitoring all real estate salespeople by June – by giving them temporary professional licences. Currently anyone can say they are an estate agent. It will be another three years however before the city’s estimated 16,000 sales agents and 5,200 agencies can be held to a professional standard via an examination.Tam Kuong Man, the Housing Bureau director, said salespeople and agencies could start submitting applications for a temporary licence from today until June 30.
HANG SENG INDEX 22440
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Locals resident on mainland can buy stocks
Tale of two airports Mainland People up, investment projects cargo down hit record low
Macau residents living and working in mainland China have been allowed since Monday to invest directly in the mainland’s stock market using renminbi. The China Securities Regulatory Commission measure also allows citizens of Taiwan and Hong Kong to invest directly in the mainland’s A-share market – yuan-denominated stocks usually closed to foreigners – on the Shanghai and Shenzhen stock exchanges.
In the first quarter of this year Macau International Airport handled nearly 1.2 million passengers, 16.7 percent more than a year before, and over 11,460 aircraft movements, 19.3 percent more. But it was the worst March for airport cargo business since 1996. The airport operator announced yesterday that it handled about 2,341 metric tonnes of airfreight last month, down by 10.2 percent year-on-year.
The number of new projects funded by Macau firms in mainland China plunged to a record-low level of just seven in February, the latest data from the Chinese Ministry of Commerce suggest. This is the lowest figure since the ministry began to release monthly data on Macau investment in September 2006 and the first time that new ventures failed to reach double-digits.
TINGYI HLDG CO
SINO LAND CO
BANK EAST ASIA
CATHAY PAC AIR
CHINA UNICOM HON
LENOVO GROUP LTD
HSI - MOVERS Name
business daily April 3, 2013
Govt ‘confident’ can business as usual monitor real estate salespeople by June Cracked window Another three years before city’s estimated 16,000 sales agents and 5,200 agencies can be held to a professional standard James Chu
Macau artist and designer
ave you ever been to the Window of the World in Shenzhen? It is a large cultural and tourist attraction with miniatures of landmarks from all around the world, including the Eiffel Tower, Dutch windmills and so forth. I believe our great policy makers in Macau, with their singular knack for creativity, are trying to turn the city into a similar place, but on a much bigger scale. Take a good look around our lovely city. Great examples are everywhere: the olive-shaped glass installations in front of the Ocean Garden near the Sai Van Bridge approach, with a design concept 90 percent similar to the Gherkin in London designed by Norman Foster; the Casino Oceanus near the ferry terminal, which obviously is just a smaller if not uglier version of the Beijing Olympic Games Water Cube. And there are more to come. Following the Venetian Macao, a new development by Sands China Ltd called The Parisian will bring the Eiffel Tower to Macau. This fad is growing not only in the private sector but also in the public sector, as we can see with the new campus of the University of Macau on Hengqin Island. Not long ago, Macau’s press discovered that the design of the new campus is almost the same as that of the architect’s previous project, Nanjing Audit University. The architect’s most famous project is the China Pavilion at the Shanghai World Expo, which has been criticised for looking very similar to the distinctive University of California San Diego’s Geisel Library, designed by William Pereira in 1970. This library was dubbed one of the world’s 25 best libraries in 2008. Well, which is worse? Taking, ahem, inspiration from your own design or taking inspiration from somebody else’s design? I suggest that our government draw up a master plan to develop the entire city in line with this theme park concept. And don’t forget to change our advertising slogan to: ”Macau – the window of the world”.
TO THE MAJ OR 201 BUS 3 Bu INES prog sine s r S AW a s Awa sect m for ARD rds ors. p r o of t S IN bus fess Par h i
Real estate sales agents and agencies can apply for temporary licences from today
he Housing Bureau pledged it would finish issuing all the three-year temporary licences for estate agencies and sales agents here within three months. The property industry has previously expressed doubts over whether the government could handle all applications within such a short period. Tam Kuong Man, the bureau director, said in a press conference yesterday it has enough human resources, as well as “the assistance of a computer system”, to cope with the case load. The bureau had previously blamed a lack of human resources for a delay in starting the application process for city residents to buy public housing. “We believe we have the ability to release the temporary licences to all agents and brokers in the [real] estate industry by June 30,” Mr Tam pledged. The law on estate agents, gazetted in November but only coming into force this July, for the first time requires all sales agents and agencies in Macau to take an exam to get a licence to operate. But the agents and agencies already operating before November 12 are given a three-year grace period by offering them temporary licences. Mr Tam said salespeople and agencies could start submitting applications to his bureau from today until June 30. They can also do so via five industry associations, including the Macau General Association
of Real Estate and the Macau Association of Building Contractors and Developers. The application approval procedures would take less than a month, the bureau said. The threeyear temporary licences will cost between 1,000 patacas for a broker and 2,000 patacas for an agency. Mr Tam estimated more than 16,000 real estate agents and more than 5,200 agencies were eligible to apply for such licences. Industry representatives told Business Daily last week they were unsure of the contents of the qualification exam and the training courses for a final licence. Hung Ling Biu, head of the Labour Affairs Bureau’s Vocational Training Department, said all the exam content – including more than 500 questions and answers – had already been uploaded to the bureau’s website. The training course would include a 30-hour course on legal and practical knowledge on the property industry, he said. The agents could be exempt from taking the qualification exam if they attended 80 percent of the classes. But those training courses would only be provided for agents aged 40 or above with at least five-year experience in the business, says the law. The Housing Bureau stressed the penalties for breaching the law – between 20,000 patacas and 100,000 patacas and a possible business suspension for six months – were “adequate”.
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April 3, 2013 business daily | 3
March casino revenue up 25pct to new monthly record Five Friday to Sunday periods in the month might have helped the numbers Michael Grimes
Yr-on-yr revenue growth for Q1 2013 adjusted for leap year 2012, says Union Gaming
acau’s March gaming revenue jumped 25 percent year-on-year. It was a new monthly record thanks in part to the high baseline created by the surge in VIP gambling revenues seen in 2010 and 2011. This March’s gross revenue tally reached 31.34 billion patacas (US$3.91 billion), beating the previous monthly record of 28.25 billion patacas set in December last year. The fact March had five full weekends – i.e., five Friday to Sunday periods – could have been a factor in creating the new record. Analysts say weekends usually generate more revenue – especially in the mass segment – than weekdays. “We note that March 2013 did have one extra Sunday as compared to last year,” said Grant Govertsen of Union Gaming Research Macau in a note. The research house added that for the first quarter as a whole, gross gaming revenues probably rose 16 percent. “For the entire first quarter 2013, which helps smooth out certain volatilities associated with luck (i.e. higher hold in March and lower hold in February), GGR of 85.3 billion patacas was up 14.8 percent. However, when adjusting for the one extra day in the first
Weekend traffic – extra Sunday in March this year
quarter 2012 due to leap year, we estimate GGR in the first quarter 2013 was up 16.0 percent,” stated Union Gaming. The breakdown on how much of March’s casino revenue came from VIP gambling and how much from the mass market is not yet available. Recently VIP revenue growth appears to have slowed. But that has been compensated by 30 percent plus year-on-year expansion in the more profitable mass and premium mass segments. This trend – which began last year – has helped to create a significant improvement
in EBITDA [earnings before interest, taxation, depreciation and amortisation] margin for most of the six Macau casino operators. It also appears to explain why last week they reported significantly strengthening profits in 2012 on more modest overall revenue growth or even revenue decline in the case of Wynn Macau Ltd.
Table split Last month market wide, business from both mass-market and VIP segments had been strong, RBC
Capital Markets analyst John Kempf wrote in a March 25 note. The same day Kenneth Fong of J.P. Morgan in Hong Kong, had predicted 26 percent year-on-year growth for March, adding this would imply that VIP revenue was growing by around 20 percent, “the strongest since the first quarter of 2012”. The current importance of the mass market to the operators was illustrated last week. Galaxy Entertainment Group Ltd’s vice chairman Francis Lui Yiu Tung said during the firm’s 2012 earnings press conference in Hong Kong that of 50 ‘new’ tables recently granted to it by the government, two-thirds would be going to the mass market and only a third to the VIP. In March according to unofficial market data compiled by Business Daily, Galaxy’s third place market share slipped by one percentage point from 19 to 18 percent. SJM Holdings Ltd remained in top spot, up one percentage point month-on-month to 27 percent. Sands China held steady in second spot at 21 percent, while Melco Crown Entertainment Ltd stayed in fourth place, up one percentage point to 14 percent. Wynn Macau Ltd was down one percentage point but remained in fifth with an 11 percent share, while MGM China Holdings Ltd was in sixth position, down one percentage point month-on-month at nine percent.
Market Share Per Operator (2012-2013) Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar SJM
27% 25% 29% 26% 26% 26% 27% 27% 28% 26% 26% 26% 27%
Sands China 17% 18% 17% 18% 22% 19% 18% 21% 21% 21% 20% 21% 21% Galaxy
20% 21% 20% 23% 19% 21% 18% 19% 16% 18% 19% 19% 18%
12% 13% 11% 12% 11% 12% 13% 10% 12% 10% 11% 12% 11%
14% 14% 12% 13% 13% 13% 14% 14% 14% 14% 14% 13% 14%
10% 10% 11% 9% 9% 10% 10% 9% 10% 11% 9% 10% 9%
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total
Residents in mainland get yuan stock access Move is likely to have little impact, as Macau investors still prefer Hong Kong market Vítor Quintã
acau citizens living and working in mainland China are allowed since Monday to invest directly in the mainland’s stock market using renminbi. The China Securities Regulatory Commission measure also allows citizens of Taiwan and Hong Kong to invest directly in the mainland’s A-share market – yuandenominated stocks usually closed to foreigners – on the Shanghai and Shenzhen stock exchanges.
Under the new regulation, investors from the three regions will need to provide their identification cards, mainland travel permits and temporary mainland residency certificates to open an A-share investment account. The new policy is expected to bring over 10 billion yuan (12.9 billion patacas) of capital to the A-share market, Shanghai Securities News reported last Monday. However the move is likely to have little impact for the territory.
The Chinese national census conducted in 2010 showed there were just 21,201 Macau residents living in the mainland. Macau investors have been more willing to invest in red chip stocks – Chinese companies listed in Hong Kong – than in A-shares, trading behaviour expert William Cheung Ming Yan told Business Daily in July. In 2011, Macau residents invested 21 percent of their portfolio or 35.5 billion patacas (US$4.4 billion) in
mainland securities, up by more than a third from the previous year, the Monetary Authority said in July. However, the Hong Kong securities – seen as “relatively safer,” said Mr Cheung, a University of Macau scholar – overtook mainland securities as preferred destination for Macau investment, according to the 2011 Coordinated Portfolio Investment Survey. There is of yet no official data on Macau investors’ preferences last year.
business daily April 3, 2013
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HOSPITALITY Increasing predominance Worry that Macau is becoming ever more dependent on mainland China for tourists is increasing. Of our main sources of visitors, the mainland is the only one that has been increasing in importance in the past few years. The data for 2011 and last year indicate that the tendency of mainlanders to predominate is getting stronger. To put this in perspective, in both years the number of visitors from Taiwan, Japan and South Korea combined in the peak month of August was about 200,000. Taiwan is our third-biggest source of tourists, Japan our fourth-biggest and South Korea our fifth–biggest. That combined total is just one-quarter of the number of visitors from Hong Kong and just one-tenth of the number of visitors from the mainland in each of the past few months.
Roadworks, new rules could hit car sales With uncertainty over changes to Macau’s road network, car sales might be flat this year Tony Lai
ith road works worsening traffic congestion and the possibility of new administrative measures to raise the cost of owning vehicles, car dealers are having trouble predicting this year’s sales. Patrick Tse Ka Ming, president of the Macau Motor Traders Association, said the sales of new private cars in the first two months of 2013 grew about 10 percent year-on-year to more than 1,000 vehicles. But Mr Tse, also general manager of Xin Kang Heng Holdings Ltd, which is the main distributor of Honda cars, was conservative on the outlook for the following months. “We would be happy if we could achieve the same overall result as last year,” he told Business Daily. The dealer expects annual sales performance to range between a decrease of five percent year-on-year and five percent growth. Last year 9,563 new private cars were sold, an expansion of 13 percent from 2011. The increase was spurred by tax breaks on the purchase of environmentally friendly motor vehicles he suggested. This year things could be very different. “There are possibly new measures from the government to raise the costs
of keeping a car like hikes on parking fees and taxes,” Mr Tse explained. “Traffic congestion could worsen as there is a lot of on-going construction affecting the road conditions, like the Light Rapid Transit works in Taipa,” he added. “These will all dampen the willingness of buyers to purchase new cars.” The Transport Bureau said on December 28 that it would launch a public consultation in the first quarter of 2013 on possible measures to ease road traffic congestion, including heavier annual taxes on vehicles and increases in public parking charges.
Cheaper yen Mr Tse also said about half of the private cars sold in the JanuaryFebruary period were imported from Europe while the remainder were vehicles made in Japan. He told Business Daily in January that annual sales of European cars were now only a tenth of those recorded annually for European vehicles four years ago. But a more stable exchange rate for the Hong Kong dollar against the euro have once again increased
buyers’ willingness to invest in European-made private transport. According to data compiled by Bloomberg, the value of the Hong Kong dollar – the currency of choice for Macau car dealers – fluctuated between 8.56 yen and 10.20 yen in the past year. That’s a variation of 19 percent. The value of the euro only fluctuated between HK$9.30 and HK$10.40 – a variation of just under 12 percent. However the association president said yesterday that more buyers would turn to Japanese brands in the remainder of the year due to the recent depreciation of the yen. “The impact of the weakening yen will start showing in the price of Japanese cars this quarter as this process usually takes some time,” he said. Mr Tse made no estimates however on how low the price of Japanese cars could go. New Japanese prime minister Shinzo Abe announced an economic stimulus package in January that has weakened the yen. According to the Hong Kong Association of Banks, the yen had depreciated by 6.7 percent against the Hong Kong dollar since the beginning of the year.
The numbers of South Korean visitors followed an upward trend in 2011 and last year, and data for January and February this year suggest this trend may be sustained. But this did not make up for the declining numbers of visitors from other sources, notably Japanese. The downward trend in the numbers of Japanese tourists became more pronounced after the middle of last year. The numbers of visitors from Taiwan, Japan and South Korea combined followed a shallowly declining trend. As the numbers of tourists from Hong Kong have also been declining gradually, the predominance of mainlanders among our visitors looks set to increase and persist. This explains the sensitivity here to frequent conjecture that the mainland authorities may be about to restrict the flow of tourists into Macau. J.I.D.
Proportion of visitors from the five main sources in the first two months of 2013
Japanese cars actually made in Japan might get cheaper as yen weakens
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April 3, 2013 business daily | 5
Happy days are here again for the airport More flights in and out of Macau mean more passengers Tony Lai
acau International Airport handled over 408,000 passengers last month, 22.4 percent more than a year earlier, as more flights came and went. The number of takeoffs and landings was over 3,900 last month, 23.5 percent more than a year earlier, data released yesterday by Macau International Airport Co Ltd (CAM) show. In the first quarter of this year the airport handled nearly 1.2 million passengers, 16.7 percent more than a year before, and over 11,460 aircraft movements, 19.3 percent more. It was the busiest March and first quarter for the airport since 2008, when it still served as a staging post for passengers travelling between Taiwan and mainland China, there being no direct flights across the Taiwan Strait then. Regular, direct flights between Taiwan and the mainland began
in July 2008. CAM said in a written statement that it was optimistic about business in the coming months. “As a world tourism and leisure centre, Macau is attracting more travellers coming by air,” it said. The Civil Aviation Administration of China has announced that in the next seven months airlines will increase the number of flights from Macau to the mainland and viceversa by 12 percent to 560 a week. The city’s flag carrier, Air Macau Co Ltd, believes extension of the operating hours of passport and customs control would help the development of civil aviation here. The airline’s chairman, Zheng Yan, told reporters yesterday that this would make it more convenient for mainlanders, particularly those from western Guangdong, to take early or late flights to or from Macau. This would be beneficial to Air Macau as mainlanders now made up 70 percent of its passengers, said Mr Zheng, speaking on the sidelines of a ceremony to inaugurate the airline’s new service to Jinjiang, the provincial capital of Fujian. The supervisor of the customs post at the Gongbei border crossing, Lao Ngai Leong, said this week that the land crossing would soon be open for two hours longer on public holidays. Mr Lao said it would be open from
Less Taiwan freight cuts CAM business Last month was the airport’s slowest March for cargo since 1996 Vítor Quintã
he amount of cargo going through Macau International Airport continued to decrease in the first quarter of this year, extending a two-year-old slump. The airport operator, Macau International Airport Co Ltd (CAM) announced yesterday on that it handled 2,341 tonnes of cargo last month, 10.2 percent less than a year before. It was the slowest March for air freight since 1996. The airport opened in November 1995. In the first quarter of this year the airport handled 5,985 tonnes of cargo, 7.2 percent less than a year before. Since 2005, when the airport handled 227,233 tonnes of cargo, its air freight business has fallen every year except 2010, when business rose slightly. The CAM subsidiary that manages the airport, Administration of Airports Ltd, says the decrease the amount of cargo the airport handled in the first two months of this year was due mainly to less air freight going to or coming from Taiwan. In the first two months the airport handled 1,383 tonnes of Taiwan cargo, 43 percent less than a year before. Before direct flights were allowed between Taiwan and mainland China,
the airport was a staging post for air freight going from one to the other. The amount of Taiwan cargo handled at Macau airport had been declining even before regular direct flights across the Taiwan Strait began in July 2008, but the decline became more pronounced after that. Even so, of the cargo that the airport handles, 38 percent still comes from or goes to Taiwan and 21 percent comes from or goes to the mainland. In the first two months the airport handled 759 tonnes of mainland cargo, 44 percent more than a year before. The amount of cargo transhipped at the airport was 739 tonnes, 43.8 percent more than a year earlier, 482 tonnes of which was bound for the mainland.
The airport operator is optimistic about business in the coming months
6:00am to 1:00am on public holidays instead of from 7:00am to midnight. Mr Lao, who is also a Macau deputy in the National People’s Congress, said that, beginning in the
second half of this year, the Hengqin Island border crossing was likely to stay open longer, from 8:00am to 10:00pm instead of from of 9:00am to 8:00pm.
business daily April 3, 2013
Easter’s visitor growth lags Lunar New Year’s
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Unequal burden The unemployment rate has been 1.9 percent for the past few months, the lowest on record. But this figure, simply showing the proportion of the labour force that is unemployed, may conceal big differences between unemployment among men and unemployment among women, and between unemployment among people of different ages. The changes in the numbers of unemployed people in the past few years are more revealing than changes in the unemployment rate.
Holidaymakers from Hong Kong and Southeast Asia are the most visible Vítor Quintã
Between Friday and Monday 107,230 visitors entered the city
he growth in the number of visitors to Macau was slower during the Easter holidays than during the Lunar New Year
Unemployment was greatest in the period under review among people younger than 25 and among people between 45 and 54, but for different reasons. Unemployment among the young is associated the flow of new blood into the labour force as youngsters finish their education. The number of young unemployed people usually grows considerably in the middle of the calendar year, when the school year ends. Most of these young unemployed can expect to get a job within months. Unemployment among people between 45 and 54 is associated with their advancing age and the waning of demand for their skills. The lesser numbers of unemployed among those between 55 and 64 is due to people in this age group retiring early or simply abandoning the labour market – something many women tend to do. People younger than 25 or between 45 and 54 were those harmed most by the economic slowdown in 2009. Often, in economic slumps, people that leave the labour force are replaced more slowly than in more prosperous times or not replaced at all, as employers postpone taking on new employees or seek to reduce their workforces. J.I.D. The content of this column is the work of Business Daily’s journalists.
Decrease in number of jobless since 2009
holidays, official data show. Between Friday and Monday 107,230 visitors entered the city, 2.3 percent more than during the Easter
holidays last year, the Public Security Police announced yesterday. During the eight days of Lunar New Year holidays this year, 15.6 more visitors came than during the equivalent period last year. The secretary-general of the Macau Hoteliers and Innkeepers Association, Kenny Cheung Kin Chung, said last month that the main sources of tourists over the Easter holidays were Hong Kong and Southeast Asia. None of the Easter holidays is a public holiday in mainland China, but that does not stop some mainlanders from paying an Easter visit. “In recent years, we have also increasingly noticed tourists from the mainland visiting Macau during the Easter holidays, whose aim is mainly to experience the festive mood,” Mr Cheung told Business Daily. Several upmarket hotels offered discounts for the Easter holidays. At Lunar New Year the average room rate in five-star hotels peaked at 2,729 patacas (US$341.30). Mr Cheung’s association, comprising mainly three-star and four-star hotels meant for package tourists, was hoping for occupancy rates over the Easter holidays of 80 percent to 90 percent. Many Macau people went away for the Easter holidays. Over the four days 994,017 people crossed the border. The Gongbei crossing, as usual, was the busiest, just under 585,000 people using it. Over 212,400 people entered or left the city through the Outer Harbour Ferry Terminal.
Civic group eyes consultation on universal suffrage Universal suffrage is still possible here, civic group and legislator agree Stephanie Lai
he Macau government should conduct an “open” and “honest” public consultation over a reform of the political system, civic group Macau Conscience said in a press briefing yesterday. The consultation should focus on the recommendations issued by the United Nations’ (UN) Human Rights Committee, which called for universal suffrage. “As pointed out by the UN, its [International] Covenant On Civil And Political Rights also directly applies to Macau,” said founding member Jason Chao Teng Hei. “But we don’t think article 25 (a) is being realised in here.” That article states that every
citizen should have the right to “take part in the conduct of public affairs, directly or through freely chosen representatives”. “At least Macau needs a public consultation on an outline for how we can adopt universal suffrage, and the respective timeline,” Mr Chao stressed to Business Daily. Legislator Gabriel Tong Io Cheng reckons the Basic Law does not deny the possibility of adopting universal suffrage. But this option is not mandatory according to the legal framework, Mr Tong, also a University of Macau law professor, emphasised. “There is still room to discuss the possibility of realising universal
suffrage,” said Mr Tong. “But I don’t think the UN report has fully taken account of the real social status and democratic development in Macau, as well as its Basic Law framework.” “Each country or district should have its own way to realise the spirit of universal suffrage stipulated by the covenant,” the professor added. “And so far I don’t think the political development in Macau has contravened the covenant.” The Macau Conscience also accused the administration of lack of commitment in ensuring the independence of the Commission Against Corruption.
April 3, 2013 business daily | 7
MACAU Melco’s Manila unit to launch offering roadshow Melco Crown (Philippines) Resorts Corp. – the Philippine unit of Macau gaming company Melco Crown Entertainment Ltd – will begin an institutional roadshow over its proposed share offering, the company said in a filing to the Philippines Stock Exchange on Monday. The firm plans to raise US$400 million (3.2 billion patacas) through an offering of 1.2 billion shares, a 20 percent stake. The money would be used to invest in an “integrated casino, hotel, retail and entertainment complex” known as Belle Grande Manila Bay on a 6.2-hectare (15.3-acre) site at Entertainment City Manila.
Mainland investments dwindle in February Only seven new Macau investments in the mainland are approved Tony Lai
he Ministry of Commerce approved only seven new investments in mainland China by Macau enterprises in February, the fewest in any month since the ministry began publishing monthly figures in September 2006. February was also the first month since then wherein the ministry approved fewer than 10 new investments in the mainland by Macau enterprises. Data from the ministry show that
the number of such investments that it approved in February was half the number that it approved a year earlier. The ministry gave no reason for its having approved so few in February. It may be due to the Lunar New Year holidays, which fell in February. In each of the past three years the ministry has approved fewer such investments in February than in any other month. While it approved only seven new investments in the mainland by Macau
enterprises in February this year, the combined value of those investments was US$30 million (240 million patacas), the same as the combined value of such investments approved a year earlier. In the first two months of this year the ministry approved 30 new investments by Macau enterprises in the mainland, the same number as a year earlier, with a combined value of US$80 million, 80.5 percent more than a year earlier. Since 1990 the ministry has
approved over 13,170 such investments, together worth US$10.96 billion. Data from the ministry show the value of trade between Macau and the mainland was US$570 million in the first two months of this year, 52.6 percent more than a year earlier. Most of the growth was due to Macau importing more from the mainland, but some was due to Macau exporting more, exports to the mainland having been five times as much again as a year earlier.
business daily April 3, 2013
High rents put squeeze on small bus Value of retail shop-ownership transactions rose to HK$85 billion last year
ents are climbing in neighbourhoods near Causeway Bay and Hong Kong’s other prime shopping districts, known for luxury stores that attract free-spending tourists from mainland China. That’s squeezing out momand-pop shops, congee and noodle vendors and other small businesses as developers and landlords seek to profit from the trend. Over the past decade, car-repair shop owner Benny Chan has seen more than 70 percent of his smallbusiness peers disappear as his Hong Kong neighbourhood fills up with high-end Western bars and Japanese restaurants. “Rents here are going up multiple times,” said Mr Chan, who’s been in business since 1985 in the Tai Hang area, just east of the ritzy Causeway Bay shopping district. “We’ll all be out of here in the next four to five years.” “There’s only a limited supply of good spots and the rents are super high” in major shopping districts, Joe Lin, Hong Kong-based senior director for retail services at CBRE Group Inc., said in an interview. “It’s natural that restaurants and some retailers would find these fringe areas with an equally hip, high-spending crowd more attractive.” Shops in Causeway Bay fetch an average US$2,630 (HK$20,417) per square foot a year, the highest in the world, according to a November report by broker Cushman & Wakefield Inc. For a 500- squarefoot (46-square-metre) shop, that’s an annual rent of US$1.32 million.
Across the harbor in Tsim Sha Tsui, retailers including Dolce & Gabbana Srl and Chanel Inc. pay US$1,547 a square foot annually. Retail rents in the Central business district, where banks including Goldman Sachs Group Inc. and UBS AG have offices, are US$1,856 a year.
Seizing opportunities Developers are taking advantage of the opportunity. Soundwill Holdings Ltd, a mid-size local builder, last year completed a 163-unit apartment building in Tai Hang and has begun work on another. A block away, the company has plans for a 65,000-squarefoot project with Henderson Land Development Co., controlled by billionaire Lee Shau Kee. “It’s only a 15-minute walk from the world’s most-expensive shopping location,” Soundwill executive director Dickson Lau, referring to Tai Hang’s proximity to Causeway Bay, said in an interview. “With all the new restaurants and apartments, there’ll be a huge upgrade in the standard of living in this area.” Shares of Soundwill, which owns 20,000 square feet of retail space on Causeway Bay’s Russell Street, have risen almost 11-fold since early 2009, after profit tripled in the period. Mr Lau said the group expects rental income to double this year from 2012. To the west of Hong Kong’s Central business district, in the historic areas of Sheung Wan, Sai Ying Pun and Kennedy Town, mom-
Small businesses are vanishing from Hong Kong’s main districts
and-pop shops also are being pushed. “To open here is risky, but so far we’re doing good,” said Jerome Spitzer, whose Metropolitan restaurant in Sai Ying Pun replaced a neighbourhood grocery in March, adding to his three French restaurants
in Central. Serving Nicoise salads and tarte tatin, the restaurant has a facade designed to resemble the Art Nouveau metro station entrances of Paris. “Business is good if you’re already an existing operator in Central,” said Mr Spitzer, whose French Creations
Taiwan lenders expect to attract Solar companies locked o Expansion to slowdown in the industry more Chinese investment C T aiwan will let Chinese banks own as much as 20 percent of some financial institutions, raising a limit on mainland ownership from 5 percent as cross-strait economic integration deepens. Taiwan’s Financial Supervisory Commission announced the move on Monday after its chairman Chen Yuh-chang met his counterpart from the China Banking Regulatory Commission, Shang Fulin, in Taipei in the third gathering of its kind since 2011. Larger potential investments may turn into partnership opportunities for Taiwanese banks such as Fubon Financial Holding Co. and Cathay Financial Holding Co., which are seeking greater profits outside of a saturated home market. Chinese President Xi Jinping has pledged to promote cross-strait ties, continuing efforts of the previous administration. “Taiwan lenders anticipate attracting Chinese investment and are eyeing future expansion opportunities in China,” Chuang Piyen, a Taipei-based banking analyst at Mega Securities, said before the announcement. Mainland China banks will be allowed to take a 10 percent stake in listed financial institutions, 15 percent in unlisted firms, and as much as 20 percent of banking units of financial holding companies, the
Taiwan regulator said in a statement. The higher cap will take effect as soon as possible, Kuei HsienNung, director general of the FSC’s banking bureau, said yesterday, and will be completed under the services and trade pact of the Economic Cooperation Framework Agreement signed between the two governments in 2010. China will also let its commercial banks invest in Taiwan stocks under the qualified domestic institutional investor, or QDII, programme. An agreement between the regulators signed on Monday will take effect within 60 days, the FSC said. Taiwan’s financial regulator in 2011 urged lenders to expand faster on the mainland as competition erodes returns at home. The banks have the second-narrowest net interest margin in the Asia-Pacific region, after Japan, data compiled by Bloomberg show. Standard & Poor’s said in a March report that Taiwan’s banking sector profitability is “mediocre” compared with its peers in Asia. “The development of Taiwan banks has reached a bottleneck in the saturated domestic market as overbanking is a big problem,” said Mega’s Mr Chuang. “The opportunities to expand business in China will be a driver for its earnings growth.” Reuters
hief financial officers of China’s biggest solar equipment makers say they have been locked out of the bond market by Suntech Power Holding Co.’s default on US$541 million of convertible notes. Yingli Green Energy Holding Co. CFO Bryan Li, Trina Solar Ltd CFO Terry Wang and JA Solar Holdings Co. chief operating officer Xie Jian said in separate interviews they expect credit will be difficult to obtain and they have no plans to sell debt. JinkoSolar Holding Co.’s sale of 800 million yuan (US$129 million) of bonds due January 2019 earlier this year is the only industry issuance in the last ten months, compared with two sales in the first half of 2012 raising 2.5 billion yuan and six during 2011 raising 6.2 billion yuan, according to data from Bloomberg New Energy Finance. “Obtaining credit facilities will be harder as everyone thinks more carefully,” Yingli’s Mr Li said in a telephone interview. “Expansion will slow down in the industry to ease oversupply. It will also spur industry consolidation, so it’s a good thing in the long run.” Suntech’s March 15 default came after Premier Li Keqiang said the government will reduce its role in the economy and highlights risks in an industry where panel prices tumbled
Solar debt – more difficult to sell at home
57 percent in the past two years. The three executives need to service a combined US$4.8 billion of debt, after losses widened to US$740 million last year. They face losing access to debt capital markets as onshore corporate bond sales in China surged 60 percent in the first quarter versus the previous corresponding period and dollar issuance rose 67 percent. Global company note offerings fell 8.6 percent.
April 3, 2013 business daily | 9
the past five years to about HK$40 to HK$60 a square foot, according to Helen Mak, Hong Kong’s head of retail-services at broker Colliers International. Still, at upwards of HK$720 a year per square foot, they remain well below those in top shopping districts such as Causeway Bay, she said.
group also runs a fifth restaurant in Happy Valley near Causeway Bay. “But to open another new one there – the rent is just crazy.” Monthly rents for ground-level shops in the up-and-coming fringe areas have risen “multiple times” in
The value of retail shop-ownership transactions rose 78 percent to HK$85 billion last year from 2011, extending a record, according to Centaline Property Agency Ltd, which began collecting data in 1996. Real estate brokers are expecting rental growth in the city’s busiest shopping areas to slow for a second straight year in 2013 as mainland Chinese tourists cut spending on luxury goods and the global economic outlook remains uncertain. Average prime shop rents in Hong Kong may rise 8 percent this year, down from growth of 9 percent a year earlier and 27 percent in 2011, according to CBRE, the world’s biggest commercial realtor. New York-based Cushman sees rents gaining about 5 percent this year, according to Michelle Woo, Hong Kong-based senior director of retailtransaction services. “The drop in luxury and bigticket purchases has impacted overall retail sales,” said Ms Woo. “We’re seeing a pullback in the expansion of this sector in the second half because of the slight shift in shoppers’ spending patterns.” Still, analysts are predicting retail will beat residential and office as the best-performing Hong Kong property market this year, amid government curbs on home prices and a shrinking financial-services industry that’s damping demand
for prime office space. Shares of landlords with large shopping-mall portfolios, including Wharf Holdings Ltd and Hysan Development Co., will probably outperform those of residential developers such as Sun Hung Kai Properties Ltd and Hongkong Land Holdings Ltd, the biggest office landlord in Central, according to BNP Paribas SA analyst Lee Wee Liat. Even so, not all retail properties would fare equally well. Some luxurybrand shops are beginning to move from street level into less-expensive shopping malls as rents rise. “There’ll be a retail migration to the second-best space,” said Mr Lee, who estimates current mall rents to be about a third of street-level rents in the same area. “There needs to be a narrowing in the gap between the two, and this will be good for the landlords.” Bloomberg News
Value of the square foot in Causeway Bay, according to Cushman & Wakefield
out of market Apple apologises to mainland customers
China cited by U.S. for trade barriers China continues to restrict U.S. producers of autos, steel and beef from gaining access to its markets, and its protection of intellectualproperty rights remains inadequate, the U.S. Trade Representative’s office said. While the mainland has made progress opening its markets to foreign competition, “some serious problems remain, such as China’s refusal to grant trading rights for certain industries,” according to the agency’s annual report to Congress on trade barriers, released yesterday. The USTR also released two other reports covering health and regulatory trade barriers in China and other countries. “These reports identify the barriers as well as the initiatives that USTR is undertaking to secure market access for made-in-America goods and services across the globe,” acting U.S. Trade Representative Demetrios Marantis said on a conference call with reporters. President Barack Obama’s administration is seeking to bolster enforcement of commerce rules as it pursues two trade deals, one with 10 other Pacificregion nations and another with the 27-nation European Union. Last year the White House created a unit led by USTR and Commerce Department officials to better police trade laws. China received the most-lengthy mention in the 406-page “National Trade Estimate” report, which examined policies in 57 major trading partners, the 27-nation European Union, Taiwan, Hong Kong and the 22-member Arab League.
Beijing backs N. Korea economic zone China expressed support for developing a shared economic zone in a North Korean border city amid Kim Jong Un’s threats to build nuclear weapons and attack South Korea and the U.S. Chen Jian, a vice commerce minister, said at a briefing in Beijing yesterday that he’s “optimistic” about the zone in Rason. “Various work in the Rason zone is proceeding smoothly,” Mr Chen said to reporters. “I haven’t heard anything that it has slowed down.” The comments signal China will maintain economic ties with North Korea while supporting tighter United Nations sanctions in the aftermath of North Korea’s February underground detonation of a nuclear device. A Chinese official last year promoted a Rason area as “North Korea’s Shenzhen,” referring to the southern city that led China’s rise to becoming the world’s biggest exporter. “It’s a project for people’s livelihoods under the cooperation of China and North Korea,” Mr Chen said of Rason. “It will benefit the economic development of North Korea. It’s a normal project. I am optimistic for its development.”
After state media accused the firm of arrogance, greed
“Selling solar debt will be difficult at home because the market will avoid it and the regulatory authorities will be more strict when approving new sales,” said Qin Shengyao, a Shenzhen-based bond analyst at China Investment Securities Co., a unit of State Council-controlled Central Huijing Investment Ltd. “Issuance costs will rise and it will also be harder to borrow from banks.” Bloomberg News
pple Inc. chief executive Tim Cook apologised for the company’s iPhone warranty and repair policies in China after receiving criticism from state-run media over customer service in its second-largest market. Apple, in a change in practice, will offer full replacements of older iPhones experiencing problems, Mr Cook said in a letter posted on the company’s Chinese website. Apple also vowed to improve training, customer service and monitoring of stores authorised to sell its products in China. The stock fell 3.1 percent on Monday, its biggest decline since January 24. “In the process of studying the issues, we recognise that some people may have viewed our lack of communication as arrogant, or as a sign that we didn’t care about or value their feedback,” Mr Cook said. “We sincerely apologise to our customers for any concern or confusion we may have caused.” The letter underscores China’s importance to Apple, whose stock has fallen in the past six months amid concerns about slowing sales and profit growth. The country, which is Apple’s biggest market after the U.S., accounted for US$22.8 billion in sales
in fiscal 2012, and the company sold more than 2 million iPhone 5s in the first weekend it went on sale there. “We have tremendous respect for China,” Mr Cook said. “Our customers here will always be central to our thoughts.” The apology follows criticism from Chinese media outlets of Apple’s customer service and warranty policies. State broadcaster China Central Television criticised the company’s practices on Consumer Rights Day. The People’s Daily, the official newspaper of the Chinese Communist Party, followed with articles, including a March 27 commentary that said “Destroy Apple’s ‘Incomparable’ Arrogance.’” The central government also said it planned to increase scrutiny of contracts with electronics makers, according to the official Xinhua News Agency. The negative reports focused on complaints that Apple repaired broken iPhones instead of replacing them and that warranties weren’t sufficiently long. While Apple said 90 percent of customers had been satisfied by fixes it had been making, the company also said it would replace those handsets with new ones and offer extended warranties. Reuters
Govt plans to rejuvenate old industrial base China will expand an urban regeneration plan for ageing industrial cities as part of efforts to restructure the economy and promote more sustainable growth, the National Development and Reform Commission said yesterday. The plan, to run from 2013 to 2020, covers 95 prefecturelevel cities and 25 municipalities and capital cities that were once the core of China’s heavy industrial base. A blueprint issued in November 2011 covered 62 cities. The NDRC said in a statement on its website that investments would be made to help former industrial centres upgrade technology while also providing financing support and encouraging financial innovation – including bond issuance – to raise capital for the programme. The regeneration plan also envisages increased fiscal revenue transfers to fill pension fund shortfalls and to cover redeployment costs of worker lay-offs at stateowned firms. The NDRC statement set out a raft of targets for cities covered by the plan. By 2017, high technology industries must account for 17.8 percent of the total production in the reformed areas, while services must be 45 percent of total output. Annual personal disposable income for those cities is targeted at 29,900 yuan (US$4,822) by 2017 and 13 million new jobs will be created during the same period. Reuters
business daily April 3, 2013
ASIA New stimulus should improve investors’ sentiment, analysts say
UBS fires two Singapore traders UBS AG, sued for wrongful dismissal by two former traders in Singapore, said they were fired for serious misconduct and won a bid to seal documents in the cases. “Premature disclosure of the bank’s investigation into the fired traders would hamper the bank’s ongoing probe into the matter, as well as the review carried out globally by regulators looking into the manipulation of rate fixing,” the bank said in a court filing last month. UBS, fined about US$1.5 billion in December by U.S., U.K. and Swiss regulators for trying to rig global interest rates, is still being investigated by agencies in Singapore and Hong Kong.
Billabong still in talks with takeover suitors Australian surfwear firm Billabong International Ltd said yesterday it is still in talks with two takeover suitors. Billabong has received offers from a consortium comprised of private equity firm Altamont Capital Partners and U.S. clothing group VF Corp and another group led by Billabong’s former U.S. boss Paul Naude and private equity firm Sycamore Partners. The two groups had made indicative matching offers of A$1.10 a share, but analysts expect the final bids to be about A$0.80-90. “Discussions in relation to these proposals remain incomplete,” Billabong said. It requested a trading halt until tomorrow or until it is ready to make an announcement.
Australian tycoon’s racing empire on the block Mining mogul Nathan Tinkler is selling Australia’s largest thoroughbred racing and stud empire as he struggles to pay off debts and raise funds for court battles. The young entrepreneur is asking around A$200 million (US$208.29 million) for Patinack Farm and potential buyers include Chinese parties, according to a source close to the sale. Mr Tinkler has splashed out more than A$300 million on Patinack, the fulfilment of a long-held dream for the horse racing fan, since establishing it in 2007. Mr Tinkler has swung from his position as Australia’s youngest billionaire to faltering debtor in just a few months after his undiversified portfolio was left heavily exposed to plummeting coal prices.
RBA extends rate pause at 3 pct Australia’s central bank kept its benchmark interest rate unchanged to match a half-century low in response to a recovery in household spending as traders pushed out bets on the next reduction in borrowing costs. Governor Glenn Stevens left the overnight cashrate target at 3 percent, saying “recent information suggests that moderate growth in private consumption spending is occurring,” according to a Reserve Bank of Australia statement yesterday. “There are a number of indications that the substantial easing of monetary policy during late 2011 and 2012 is having an expansionary effect”.
Foreigners sell most Korean stocks on yen, tension Local investors likely to make up for foreign selling Saeromi Shin
nternational investors sold the most South Korean equities in 10 months in March amid concerns the nation’s exporters will lose market share to Japanese rivals and as tension with North Korea rose. Foreign funds unloaded a net 2.6 trillion won (US$2.3 billion) of Kospi index shares last month, the most since May when they dumped 3.7 trillion won, Korea Exchange Inc.
data show. Purchases by domestic institutional and retail investors helped the stock gauge to trim its monthly loss to 1.1 percent. Global funds have reduced their holdings of South Korean equities as concerns deepened a weaker yen would give Japanese electronics and car makers an advantage over Korean producers. Vanguard Group Inc.’s decision to drop the country’s shares
India unlikely to hike gold duty again: minister Govt to introduce inflation-indexed instruments to curb record deficit
KEY POINTS RBI, govt working to reduce gold imports Govt to hold series of meetings with stakeholders to speed up investment ‘Reasonable chance’ of investment cap reform going through parliament
ndian Finance Minister P. Chidambaram suggested yesterday that the government is unlikely to raise the import tax on gold further to avoid gold smuggling. In January India raised the import tax on gold to 6 percent to curb purchases. Its passion for gold, seen by many as a hedge against high inflation, has led to a rise in its current account deficit, which reached an all-time high of 6.7 percent of gross domestic product in the December quarter. “We did raise tariffs from 4 percent to 6 percent, but there are limits to which tariffs can be raised on gold, because if you raise tariffs prohibitively, gold smuggling will increase,” Mr Chidambaram told Reuters in an interview. India vies with China as the top global consumer of gold, and
from its emerging-market exchangetraded fund also spurred sales. The outflows present an opportunity to add stocks cheaply, according to UBS Wealth Management. “Undoubtedly, market sentiment on South Korea is not positive at the moment, given the continued weakness of the yen and the tensions with North Korea,” Kelvin Tay, the Singapore-based chief investment
with nearly all demand covered by imports, the country’s purchases are a major factor in global prices. “Creating inflation-hedged financial instruments is a way out to reduce dependence on imports of gold. RBI and the government are working on inflation-proof, inflationindexed instruments,” he said. The Indian economy, mired by the global slowdown and stubbornly high inflation, probably grew around 5 percent in the business year ended on March 31, the slowest pace in a decade. As a part of a government drive to avert this trend, Mr Chidambaram is planning a series of meetings after his return to India with stakeholders to speed up stalled investment projects. India has a clogged pipeline of large industrial and infrastructure projects making businesses unable or unwilling to invest. Reducing
bottlenecks is a short-term measure that will help boost growth, said the finance minister. “Banks have agreed to lend to 215 projects where the investment is very large amount. We’ll bring the bankers and project developers together, identify the blocks and try to remove the blocks,” Mr Chidambaram said adding he expected to “make very quick progress in the next weeks and months.” The minister, who is in Tokyo to promote India as investment destination, has already met Prime Minister Shinzo Abe and has lined up meetings with Japan’s largest business lobby Keidanren, portfolio investors and key government ministers.
FDI caps The Harvard-educated former lawyer also said that the government
April 3, 2013 business daily | 11
ASIA officer for the southern Asia-Pacific region at the wealth management unit of UBS AG, wrote in an e-mail yesterday. “But we view this as an opportunity to accumulate given the attractive valuations and the likely fiscal stimulus from the Korean government.”
Samsung, Posco The Kospi trades at 9.2 times 12-month projected profit, a 51 percent discount versus the Nikkei 225 Stock Average’s 18.5 times, data compiled by Bloomberg show. The discount was at 54 percent on March 21, which was the biggest since May 2010, the data show.
Foreign funds sold of Kospi index shares in March
Foreign ownership of Samsung Electronics Co., South Korea’s largest company by market value, fell to 49.6 percent in March, the lowest level since June, while holdings for Posco fell to the lowest since September, exchange data showed. The yen weakened to a four-year low against the won on March 8 as Japanese Prime Minister Shinzo Abe called for more monetary easing to end deflation, making the nation’s exporters more competitive versus South Korean rivals. While Japan’s
currency has gained 4.9 percent since then, Mark Mobius, executive chairman of Templeton Emerging Markets Group, said last month investors need to watch the won “very carefully” to see if it strengthens versus the yen.
Nuclear threats South Korean exports grew less than forecast last month as improving global demand for the country’s electronics and cars was tempered by the weaker yen. Overseas shipments rose 0.4 percent in March from a year earlier, after an 8.6 percent drop in February, the Ministry of Trade, Industry and Energy said on Monday. Tensions with North Korea have risen since the communist nation detonated a nuclear device in February in defiance of global sanctions. The regime led by Kim Jong Un cut off a military hot line with the South last month, put artillery forces on high alert, threatened preemptive nuclear strikes, and went on to say it’s in a “state of war” with the South. Credit Suisse Group AG recommended an “overweight” stance on South Korean equities, analysts led by Sakthi Siva wrote in a March 25 report. The market is under-owned by foreign investors and the country is poised to benefit from a U.S. economic recovery, they said. Inflows by local investors are likely to make up for foreign selling toward the second half of this year, Barclays analysts led by Chanik Park wrote in a March 25 note, saying they are turning more “positive” on Korean equities. Expected fiscal stimulus by the government should improve local investors’ sentiment, the analysts wrote. Domestic institutional investors bought a net 1.6 trillion won worth of shares in the Kospi from mid-March to the end of the month, while retail investors purchased 831 billion won, Korea Exchange data show. Bloomberg News
BOJ may miss price target if economy changes: Abe J apanese Prime Minister Shinzo Abe said that the central bank shouldn’t pursue a 2 percent inflation target “at all costs” and may fail to achieve it should global conditions change. “The economy is a living thing and we don’t know what will happen around the world,” Mr Abe said yesterday, answering a question from opposition lawmaker Seiji Maehara in parliament. “What is important is to aim steadily for the target.” Mr Abe was speaking two days before the first monetary decision due under Haruhiko Kuroda, the new Bank of Japan governor, who has pledged to step up easing to defeat deflation and spur growth in the world’s third-biggest economy. Mr Kuroda also spoke to lawmakers yesterday, reiterating that he aims to achieve the 2 percent price goal within two years. “Though Kuroda has pledged to achieve 2 percent inflation, given Japan’s reality, this is an extremely tough goal” and Mr Abe is aware of that, said Mikihiro Matsuoka, chief economist at Deutsche Securities Inc. in Tokyo. “Under the target, the BOJ will keep expanding stimulus and its actions will help to weaken the yen, boost profits and stimulate economic growth – that’s what Abe may want to see ultimately.” Japan’s currency has weakened about 14 percent since midNovember on expectations of more monetary easing.
BOJ options Kuroda last week said the central bank will consider combining its monthly bond purchases and assetpurchase fund, as well as buying more debt with longer maturities. Mr Maehara asked the prime minister whether the price target had to be reached within two years even if it created distortions in long
Lion Air plans Asian ventures Airline aims to have 1,000 planes in 10 years India’s purchases are a major factor in global prices
will reform foreign investment caps to attract more investment to help tackle its large current account deficit. His government wants to open up the insurance and pension sectors. “I think there’s a reasonable chance that parliament will go along with my proposal. If we raise the insurance cap from 26 percent to 49 percent, automatically, the pension cap would be raised from 26 percent to 49 percent,” he said. The government is continuing negotiations on the issue. In March, India’s regional Samajwadi Party (SP), said it will keep supporting the Congress Party-led government,
after a key ally withdrew from the coalition, but said it would oppose plans to open up the insurance and pension sectors to foreign investors. India’s financial account, which includes foreign direct investment, portfolio investment and overseas borrowing by Indian companies, showed a surplus of US$31.1 billion in the December quarter for the fiscal year ended March 31. “We have to look at each cap, ask ourselves does it serve any purpose, if there’s a purpose, we’ll continue with the cap, if there’s no purpose the cap should either be relaxed or removed.” Reuters
T Lion Mentari Airlines plans to set up ventures across Asia and Australia to expand after placing orders of more than US$45 billion with Airbus SAS and Boeing Co. in the past two years. Indonesia’s biggest private carrier is considering partnerships in Thailand, Myanmar, and Vietnam, Commercial Director Edward Sirait said in an interview yesterday. Lion Air, which has the world’s biggest order backlog for 559 narrow-body aircraft, aims to have 1,000 planes in 10 years, he said. The carrier’s plan mirrors the strategy of AirAsia Bhd. that has set up ventures across the region to become Southeast Asia’s biggest discount operator. Singapore Airlines
‘The economy is a living thing and we don’t know what will happen,’ Mr Abe said
term interest rates and currencies. Mr Abe replied that while there has been talk of a two-year timeframe, “we are not advocating doing this at all costs.” Mr Maehara afterwards said the answer was different from what Mr Abe had said in the past. Mr Kuroda today convenes the two-day meeting, with former BOJ Deputy Governor Kazumasa Iwata predicting he will fail to achieve the inflation target within two years. The central bank’s quarterly Tankan survey on Monday showed confidence among big manufacturers improving by less than estimated, bolstering Mr Kuroda’s case for more stimulus. Lingering pessimism may make it harder to boost wages and spending, impeding the BOJ’s inflation goals. Bloomberg News
Ltd and Qantas Airways Ltd are among companies that have also started budget airlines as Asia’s economic growth enables more people to fly for the first time. “The outlook for budget carriers in the region is excellent,” Shukor Yusof, a Singapore-based aviation analyst at Standard & Poor’s, said by phone yesterday. “You are looking at an annual growth of 12 to 15 percent for discount carriers in this region.” Lion is also setting up a Malaysian venture to challenge AirAsia’s grip on the region’s budget travel market. Malindo Airways, which will draw its fleet from planes ordered by Lion Air Group, aims to start flights this year. The carrier, based in Jakarta, is also considering a venture in Australia, as Qantas seeks to defend its 65 percent market share in that country amid rising competition. Virgin Australia Holdings Ltd, which sold a stake to Singapore Air last year, is also seeking to build on alliances by acquiring Tiger Airways Holdings Ltd’s Australian unit and regional carrier Skywest Airlines Ltd. State-owned PT Garuda Indonesia last week said it would start a Sydneyto-London flight via Jakarta in the fourth quarter, competing with Qantas and Singapore Air. Bloomberg News
business daily April 3, 2013
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MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange)
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LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) May13 CORN FUTURE
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
1.0463 1.521 0.9458 1.2844 93.1 7.9949 7.762 6.1996 54.2913 29.38 1.2376 29.878 40.885 9739 97.416 1.21473 0.84444 7.957 10.2657 119.57 1.03
0.4223 0.0921 0.4123 0.2185 0.6552 0.0188 0.0193 0.1403 -0.0208 -0.1702 0.2343 0.0435 -0.1101 0 0.2238 0.1968 -0.1303 -0.0251 -0.1695 0.4433 0
0.819 -5.9718 -3.2142 -2.6232 -7.5188 -0.1463 -0.1469 0.5 1.2962 4.0844 -1.309 -2.8282 0.2935 0.5545 -8.3036 -0.5968 -3.4366 3.2738 2.5785 -5.018 -0.0097
1.0625 1.6381 0.9972 1.3711 96.71 8.0039 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 99.978 1.25692 0.88151 8.4957 10.9254 127.71 1.0314
0.9582 1.4832 0.9004 1.2043 77.13 7.9824 7.7498 6.1974 50.515 29.08 1.2152 28.913 40.54 9095 74.482 1.19995 0.77553 7.7018 9.6245 94.12 1.029
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business daily April 3, 2013
Money-laundering banks still get a pass from U.S. Simon Johnson
Professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics
oney laundering by large international banks has reached epidemic proportions, and U.S. authorities are supposedly looking into Citigroup Inc. (C) and JPMorgan Chase & Co. Governor Jerome Powell, on behalf of the Board of Governors of the Federal Reserve System, recently testified to Congress on the issue, and he sounded serious. But international criminals and terrorists needn’t worry. This is window dressing: Complicit bankers have nothing to fear from the U.S. justice system. To be on the safe side, though, miscreants should be sure to use a really large global bank for all their moneylaundering needs. There may be fines, but the largest financial companies are unlikely to face criminal actions or meaningful sanctions. The Department of Justice has decided that these banks are too big to prosecute to the full extent of the law, though why this also gets employees and executives off the hook remains a mystery. And the Federal Reserve refuses to rescind bank licences, undermining the credibility, legitimacy and stability of the financial system. To see this perverse incentive programme in action, consider the recent case of a big money-laundering bank that violated a deferred prosecution agreement with the Justice Department, openly broke U.S. securities law and stuck its finger in the eye of the Fed. This is what John Peace, the chairman of Standard Chartered Plc, and his colleagues managed to get away with on March 5. The meaningful consequences for him or his company are precisely zero.
Chairman’s statement At one level, this is farce. Standard Chartered has long conceded that it broke U.S. money-laundering laws in spectacular and prolonged fashion. In late 2012, it entered into a deferred prosecution agreement with the Justice Department, agreeing to pay a fine that amounts to little more than a slap on the wrist
signed a deferred prosecution agreement, which, in the case of Standard Chartered, was an acknowledgment of criminal wrongdoing. Nor has it taken action when such an agreement was violated. To see what the Fed is empowered to do under the International Banking Act, and working with state authorities, look at the case of Daiwa Bank, which received an Order to Terminate United States Banking Activities in 1995. Note to big banks: Don’t allow illegal trading in the U.S. Treasury market; on this, we may still have standards. By the way, in the case of Daiwa, there was no criminal conviction.
John Peace, chairman of Standard Chartered
(in any case, such penalties are paid by shareholders, not management). Then, on a March 5 conference call with investors, Peace denied that his bank and its employees had wilfully broken U.S. law with their money-laundering activities. This statement was a clear breach of the deferred prosecution agreement (see paragraph 12 on page 10, where the bank agreed that none of its officers should make “any public statement contradicting the acceptance of responsibility by SCB set forth above or the facts described in the Factual Statement”). Any such statement constitutes a wilful and material breach of the agreement. This is where the theatre of the absurd begins. For some reason, it took the bank 11 business days, not the required five, to issue a retraction. No doubt a number of people, in the private and public sectors, were asleep at the switch. (The Justice Department and Standard Chartered rebuffed my requests for details on the timeline.) The implications of the affair are twofold. First, with his eventual retraction, Peace admitted that he misled investors. I t a l s o w a s a n implicit admission that he had failed to issue a timely correction. Waiting 11 days to correct a material factual error is a serious breach of U.S. securities law for any nonfinancial company. Wake me when the Securities and Exchange Commission
brings a case against Standard Chartered. Of course, it’s possible that Peace didn’t deliberately violate the deferred prosecution agreement because he hadn’t read it, or at least not all the way to page 10. Peace is an accomplished professional with a long and distinguished track record. Everyone can have a forgetful moment. That still doesn’t explain why the bank took so long to correct the facts.
Leadership matters Tone at the top matters, as reporting around JPMorgan (JPM) Chase and its relationship with regulators makes clear. Will Chief Executive Officer Jamie Dimon be more cooperative
The Fed has no teeth whatsoever, at least when it comes to global megabanks
than he was, for example, in August 2011 when he refused to provide detailed information on the goings-on in his investment bank? Why hasn’t Standard Chartered’s board, which is made up of talented and experienced individuals, forced out Peace as a result of this bungling? The only possible explanation is that the board thinks Peace did nothing wrong. They may even regard U.S. laws as onerous and the Department of Justice as heavy-handed. They would be entitled to their opinions, of course. But if they would like their bank to do business in the U.S., the rules are (supposedly) the rules. If used appropriately, permission to operate a bank in the U.S. grants the opportunity to earn a great deal of profit. At a recent congressional hearing, Senator Elizabeth Warren of Massachusetts asked what it would take for a company to lose its U.S. banking licence. Specifically, “How many billions of dollars do you have to launder for drug lords?” Powell, the Fed governor, replied that pulling a bank’s licence may be “appropriate when there’s a criminal conviction”. I have failed to find any cases of the Fed ordering the termination of banking activities in the U.S. for a foreign bank after a criminal conviction for money laundering. Nor, for that matter, has the Fed taken action to shut down a bank that
Cleaning house Last summer, when Barclays (BARC)’s chief executive Robert Diamond was less than fully cooperative with the Bank of England in providing details of the Libor scandal, he was gone within 24 hours. Any bank supervisor has the right and the obligation to force out a manager who impedes the proper functioning of the financial system. The new CEO of Barclays is trying to clean house. The obstreperous approach of the previous management set the tone for the entire organisation, creating a mess of macroeconomic proportions. Will any senior executives at Standard Chartered be forced out? Could the bank lose its ability to operate in the U.S.? Based on what we have seen so far, neither seems plausible. If Standard Chartered violates its cease-and-desist order with the Fed, would it then lose its licence? Not according to what Powell said in his congressional testimony. The Fed has no teeth whatsoever, at least when it comes to global megabanks, hence the continuing pattern of defiance from JPMorgan and Dimon. If you or I tried to launder money, even on a small scale, we would probably go to jail. But when the employees of a very big bank do so – on a grand scale and over many years – there are no meaningful consequences. Bloomberg View
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April 3, 2013 business daily | 15
wires Leading reports from Asia’s best business newspapers
Paths to sustainable power
Jeffrey D. Sachs
Director of the Earth Institute at Columbia University and special advisor to the UN Secretary-General on the Millennium Development Goals
Straits Times The Inland Revenue Authority of Singapore (IRAS) will deepen its transfer pricing capabilities to help businesses with cross-border tax issues. Minister of State for Finance and Transport, Josephine Teo, said that IRAS supports crossborder businesses engaged in activities “with real economic substance”. “General antiavoidance provisions in our tax regime are set up to prevent abusive business transactions,” she said. Transfer pricing is method of attributing a company’s profits or losses before tax to certain tax jurisdictions which might be more favourable.
Korea Herald South Korea’s President Park Geun-hye on Monday ordered the military to set aside political considerations and strongly and swiftly respond to any provocation by North Korea. Her instructions came as Pyongyang continued unprecedentedly strong military threats against the South and the U.S. in defiance of the U.N. sanctions against its February 12 nuclear test and joint military drills by Seoul and Washington. “If any provocation occurs against our citizens and the Republic of Korea, a strong response should be taken without any other political consideration at an early stage,” Ms Park said.
Inquirer Business Philippine Airlines passengers in a couple of months will be able to call, text, tweet, email and surf the Internet while flying across Asia Pacific, Australasia and North America as the airline becomes the first Philippine-based carrier to offer passengers both GSM and Wi-Fi Internet. Mobile OnAir and Internet OnAir, two services of Genevabased OnAir – a global service provider of in-flight connectivity solutions – will be retrofitted on PAL’s Airbus A330-343s and Boeing B777-300ERs. The global GSM and Wi-Fi services will be launched by mid-year. The costs are included in the passenger’s mobile phone bill, as with international roaming.
Myanmar Times The price of summer paddy has soared by nearly 50 percent above last year’s level on the back of foreign demand, the chairman of the Myanmar Farmers Association said last week. Soe Tun, the association’s chairman, said the association has recommended the government to buy rice to form a stockpile now to pass the gains from the increased prices to farmers while the prices are high. “When the paddy starts to enter markets in high volumes the price will fall at a time when farmers desperately need money to repay the loans they took out to plant crops, which is something we want to avoid,” he said.
he surest bet on the future of energy is the need for low-carbon energy supplies. Around 80 percent of the world’s primary energy today is carbon based: coal, oil, and gas. We will need to shift to no- or low-carbon energy by mid-century. The big questions are how and when. Low-carbon primary energy means three options: renewable energy, including wind, solar, geothermal, hydropower, and biomass; nuclear energy; and carbon capture and sequestration, which means using fossil fuels to create energy, but trapping the CO2 emissions that result and storing the carbon safely underground. There are three compelling reasons for the world to make the shift to low-carbon energy. First, higher levels of CO2 are making the world’s oceans acidic. If we continue with business as usual, we will end up destroying a vast amount of marine life, severely damaging the food chains on which we rely. Second, CO2 is dangerously changing the world’s climate, even if many Big Oil interests would have us believe otherwise. (So, too, did the tobacco companies spend vast sums on political lobbying and bogus science to deny the links between smoking and lung cancer.) Third, we face steeply rising prices for fossil fuels, as developing countries’ growth drives up demand and conventional supplies of coal, oil, and gas are depleted. Sure, we can find more fossil fuels, but at much higher cost and at much greater environmental risk from industrial spills, waste products, leaks, and other damage.
ways that reflect their different resource endowments, industrial histories, and political pressures. Germany is undertaking the Energiewende, or transition to sustainable energy – a remarkable effort (indeed, unprecedented for a large advanced economy) to meet the country’s entire energy demand with renewable energy, especially solar and wind power. Meanwhile, France relies heavily on low-carbon nuclear power, and is switching rapidly to electric vehicles, such as the pioneering Renault-Nissan Leaf. Of the two approaches, Germany’s is the more unusual bet. After Japan’s nuclear disaster at Fukushima, Germany decided to shut down its entire nuclear power industry and shift entirely to a strategy based on greater energy efficiency (lower energy input per unit of national income) and renewables.
Low-carbon bets Even the much-heralded shale-gas revolution is a lot of hype – similar to the gold rushes and stock bubbles of the past. Shale-gas wells deplete far more rapidly than conventional fields do. And they are environmentally dirty to boot. The United States has developed many new lowcarbon energy technologies, but other countries are currently far more intent, far-sighted, and decisive than the U.S. to put these technologies to large-scale use. Politically, America is still the land of Big Oil. Americans are bombarded by industry-funded media downplaying climate change, while countries that are much poorer in fossil fuels are already making the necessary transition to a low-carbon future. Two neighbours in Europe, Germany and France, are showing the way forward – or, more precisely, the alternative ways forward – to a low-carbon future. They are going about it in
Most studies show that deep de-carbonisation of the world economy from now to midcentury will require that all low-carbon options be scaled up massively
There really is no clear roadmap for such a huge energy transformation, and Germany almost surely will need to rely on a European-wide electricity grid to share clean energy, and eventually on imported solar power from North Africa and the Middle East.
Different options France’s bet on nuclear power is a more proven option. After all, most of France’s electricity has come from nuclear power for many years. And, though anti-nuclear sentiment is very strong in Europe – and, increasingly, even in France – nuclear power will remain part of the global energy mix for decades to come, simply because much of Asia (including China, India, South Korea, and Japan) will remain major users of it. The key point is that France and Germany, and many other European countries – including the Scandinavian countries, with their considerable wind and hydropower potential – are all recognising that the world as a whole will have to move away from a fossil-fuel-based energy system. That is the right calculation. Many will no doubt argue about which alternative – France’s bet on nuclear power or Germany’s solar pathway – is wiser. But
both strategies are probably correct. Most studies show that deep de-carbonisation of the world economy from now to mid-century, a time horizon mandated by environmental realities, will require that all low-carbon options – including greater efficiency and renewables – be scaled up massively. One of the highest priorities of the new Sustainable Development Solutions Network, which I direct on behalf of United Nations Secretary-General Ban Kimoon, will be to elaborate alternative pathways to a lowcarbon economy, taking into account the specific conditions of countries around the world. Different countries will choose different strategies, but we will all need to get to the same place: a new energy system built on low-carbon sources, electrification of vehicles, and smart, energy-efficient buildings and cities. Early movers may pay a slightly higher price today for these strategies, but they and the world will reap long-term economic and environmental benefits. By embracing truly sustainable technologies, France, Germany, and others are creating the energy system that will increasingly support the world economy throughout this century. © Project Syndicate
business daily April 3, 2013
CLOSING Singapore jails ex-Chinese official
Sterlite fined for causing pollution
Li Huabo, a former local government official accused of a 94 million yuan (US$15 million) fraud in China, was sentenced to 15 months in jail for receiving stolen money in his Singapore bank accounts. Mr Li is a former section director at Poyang county’s finance bureau in China’s southeastern Jiangxi province. Outside of his official job, Mr Li traded coal, cotton and fertilizer, ran a tourist agency organising trips to Macau, and had a 42 percent stake in an oil refinery. Singapore subordinate courts Judge Siva Shanmugam doubled Mr Li’s bail to S$160,000 (US$129,292) after handing down his verdict yesterday, pending a possible appeal.
India’s top court yesterday fined Sterlite Industries, a unit of British resources giant Vedanta Resources Plc, more than US$18 million over pollution from its huge copper smelter, which has just been shut by a new row over a “toxic” gas leak. The court told Sterlite to pay one billion rupees (US$18.4) over five years for air pollution from its copper plant – India’s biggest – in Tamil Nadu state’s port city of Tuticorin. But the judge set aside a 2010 Madras High Court order to close the copper plant, which produces nearly 400,000 tonnes annually, sending shares of Indian-listed Sterlite soaring nearly three percent.
Euro zone jobless rate hits 12 pct Survey confirms deterioration in the manufacturing sector in March
he euro-area unemployment rate rose to a record 12 percent in early 2013, adding to signs that the currency bloc’s recession extended into the first quarter. Unemployment in the 17-nation euro area was 12 percent in February and the January figure was revised up to the same level from 11.9 percent estimated earlier, the European Union’s statistics office in Luxembourg said yesterday. That is the highest since the data series started in 1995. The highest rate was 26.4 percent in Greece, although the most recent figure for the country was from December. The jobless figures from Eurostat also showed that Spain’s unemployment rate hit 26.3 percent in February, while the rate in Portugal remained stable at 17.5 percent. The euro-zone economy has contracted for five straight quarters and that trend is forecast to continue in the first three months of this year, a Bloomberg survey shows. The European Central Bank, which holds a rate-setting meeting this week, forecasts the economy will shrink 0.5 percent in 2013. The ECB has held its key rate at 0.75 percent since July. “An end to the euro zone’s labourmarket downturn is not yet in sight,” Martin van Vliet, economist at ING Bank NV, said in a research note. “We cannot fully rule out a surprise rate cut or new unconventional
The unemployment rate in Spain rose to 26.3 percent
support on Thursday.” Yesterday’s report showed that 19.1 million people were unemployed in the euro area in February, up 33,000 from the previous month.
The European Commission predicts unemployment rates of 12.2 percent this year and 12.1 percent in 2014. ECB President Mario Draghi said on March 7 that “it is of
particular importance at this juncture to address the current high long-term and youth unemployment”. Businesses ranging from banks to carmakers and airlines are trying to cut costs by shedding jobs. Spain’s CaixaBank last week reached an accord with its unions to cut 2,600 jobs. Danone, the owner of Evian bottled-water and Activia yogurt, plans to shed 900 jobs in Europe as demand weakens. Fiat SpA chief executive ergio Marchionne last month spoke out against deeper budget cuts. “I understand austerity, but we can lose weight until we die,” he said. The strains in the region have spread to the U.K., where a measure of manufacturing contracted for a second month amid weak demand in Europe for British exports. A gauge of factory activity was 48.3 in March, the second month of contraction, Markit Economics said yesterday. A separate release in the euro area showed a manufacturing gauge fell in March to 46.8 from 47.9 in February – slightly better than an preliminary estimate of 46.6, but extending its run below the 50 mark that separates growth and contraction for a 20th month. Factories in Germany and Ireland, the relative bright spots in the February surveys, fell back into decline last month. Everywhere else, the industrial rot deepened. Bloomberg News/Reuters
Philippines seeks forex, investment reforms As country won first investment grade rating last week
he Philippines is rushing reforms in its foreign investment and foreign exchange rules as it prepares for stronger fund inflows following its promotion to an investment grade credit rating. But it will take several months and possibly as much as a year before new rules aimed at opening up certain industries to more foreign investment can take effect, as they will likely require legislation, officials said. Fitch Ratings delivered the Philippines’ first investment grade rating last week, citing a persistent current account surplus and an improved debt-to-GDP ratio that fell to a 14-year low of
51 percent last year. Other debt watchers Standard & Poor’s and Moody’s Investors Service are expected to follow suit, with their actions closely watched by investors who want to put money into the country but are restricted from doing so in non-investment grade nations. But Christian de Guzman, Moody’s senior sovereign risk analyst, told Reuters they want to see more proof that Manila’s economic and fiscal gains were sustainable before considering elevating the country’s credit rating from junk bond status. Despite robust economic growth in excess of 6 percent a year, the Philippines has an investment problem, attracting paltry levels
of foreign direct investment (FDI) compared to its Southeast Asian peers. Policymakers need to attract more FDI into the real economy while curbing inflows of speculative “hot” money, which are forcing prices of stocks, bonds and the peso currency higher. The government of President Benigno Aquino is reviewing archaic laws and regulations on foreign investment, with a view to possibly opening up areas now restricted to only Filipinos. “We are trying to see which ones can be relaxed. It’s just a general review, we are not reviewing any particular sector,” said Trade Secretary Gregory Domingo. Restrictions on foreign ownership
in major industries and land acquisition by foreigners are part of the reasons investors have shunned the Philippines, resulting in net foreign direct investments of US$2 billion in 2012, or just under 3 percent of the total that flowed into a group of five peer economies including the Philippines in the 10-member Association of Southeast Asian Nations (ASEAN) in 2011. The government wants to finish the review and prepare recommended legislation before a new Congress is sworn in in July, Mr Domingo said, adding investors have been waiting in the wings for infrastructure, tourism and manufacturing projects. Reuters